Outlook: Making sense of house price claims

It is all very Alice in Wonderland. One big mortgage lender says house prices have risen at a modest annual pace of 5 per cent during the past six months. The other puts the increase at 15 per cent. Which to believe? The Mad Hatter's solution would be to split the difference and call it 10 per cent. As it happens, it is the right conclusion.

For those with short memories, the Nationwide and Halifax also came up with very different figures in 1990 and 1991, when house prices were falling sharply. The Nationwide put the decline at an annual 6 per cent, the Halifax at a less dizzying 1 per cent.

Measuring how much properties are changing hands for seems as though it ought to be straightforward, but it isn't. Any house price index needs to be adjusted for the type of property being sold so that sales of detached houses with all mod cons one month are not compared with sales of damp basement flats another. The index also needs to be adjusted for location because house prices vary so widely around the country.

The Halifax and Nationwide indices take different approaches to both these technical matters. The former, for instance, weights regional house prices according to the proportion of its lending in each region, whereas the Nationwide uses weights based on regional lending patterns for all mortgage lenders. The Halifax therefore puts more weight than the Nationwide on prices in the north.

At a time when the housing market is roaring away in London and the South- east but only just building up steam in the northern regions, it is therefore no surprise that the measures part company. Deutsche Morgan Grenfell, using weights based on the regional pattern of home ownership, gets a figure bang in the middle.

Both lenders will publish regional breakdowns later this month that will shed more light. But meanwhile there is no reason to conclude that the signals are too mixed to make any sense of them. On the contrary, the picture they paint of the housing market is perfectly clear. Prices in the south-eastern corner are still growing and growing and growing.